The Affordable Care Act requires all non-grandfathered group health plans to implement internal claims and appeals processes beginning with the first day of the first plan year occurring on or after September 23, 2010. The agencies have now released model notices for the plans to provide participants with (1) notice of an adverse benefit determination, (2) notice of a final internal adverse benefit determination, and (3) notice of a final external review decision. To download copies of the notices, use the following links:

Also, IRS published a Notice (2010-63, 2010-41 IRB, 9/20/2010) on September 20, 2010, explaining its interpretation of the Affordable Care Act’s extension of Section 105(h) non-discrimination testing to fully insured group health plans. IRS is requesting public comments for the forthcoming IRS guidance on the new rules.

As we have discussed in prior Employment Law Advisories, the Affordable Care Act extends to non-grandfathered, fully-insured group health plans, the long-standing Section 105(h) non-discrimination requirements previously imposed only on self-insured medical expense reimbursement plans. (Medical expense reimbursement plans under Section 105(h) are employer sponsored, self-funded plans that reimburse a participant or beneficiary for an eligible medical expense not otherwise covered by a policy of health insurance.)

Self-insured medical expense reimbursement plans have been subject to Section 105(h) since the 1970s. Under Section 105(h) self-insured medical expense reimbursement plans have been barred from discriminating in favor of highly-compensated individuals as it relates to plan eligibility and total benefits delivered. If a plan is found to be discriminatory under Section 105(h), then any excess benefit delivered to a highly compensated individual must be included in that individual’s gross income, subject to tax.

In Monday’s Notice, IRS explained that it is the intent of the Affordable Care Act to extend some, but not all of the 105(h) non-discrimination rules to fully-insured group health plans. IRS said it interprets the Affordable Care Act to use the same non-discrimination testing and definition of “highly compensated individual” as Section 105(h). However, under the Affordable Care Act, if a fully-insured group health plan is found to discriminate in favor of highly compensated individuals, the result of the excess benefit is not treated as taxable income to the highly compensated individual. Instead, a fully-insured group health plan failing to comply with Section 105(h) is subject to a civil action to compel it to provide non-discriminatory benefits, and to an excise tax of $100 per day per individual discriminated against for each day the plan does not comply with Section 105(h), or a civil money penalty of $100 per day per individual discriminated against.

To summarize then: (1) A self-insured medical expense reimbursement plan that fails to comply with Section 105(h) results, under long-standing rules, in the loss of a tax-free benefit to the highly compensated individual, but (2) a fully-insured group health plan that fails to comply is subject to a civil action to compel the plan to provide non-discriminatory benefits, and the plan or plan sponsor is subject to an excise tax or civil money penalty of $100 per day per individual discriminated against.

Again, the Affordable Care Act’s extension of Section 105(h) non-discrimination testing to fully-insured group health plans does not apply to grandfathered group health plans. But the pre-existing Section 105(h) non-discrimination testing rules continue to apply to self-insured medical expense reimbursement plans regardless of whether they are grandfathered plans.

IRS is considering issuing guidance on the extension of Section 105(h) testing and has requested public comments be received by IRS no later than November 14, 2010. To send IRS a comment:

The National Labor Relations Board has ruled that the results of a 2003 union election at a set of New York group homes for the developmentally disabled should stand, rejecting claims by the employer that a state law had made a fair election impossible. The decision resolves the oldest election case pending at the Board.

Employees at Independence Residences, Inc. voted 68 to 32 to join the Union of Needletrades, Industrial and Textile Employees (now UNITE-HERE!) in a mail ballot. Under the Board’s ruling, the union will now be certified as their representative.

After agreeing to a union election in the spring of 2003, the employer – a non-profit company largely supported by public funds — asked to withdraw from the election. It argued that a new state law forbidding the use of state funds to support specific activities intended to encourage or discourage unionization would unfairly constrain the employer’s ability to express its views. (The state law is being challenged in federal court on grounds that it is preempted by federal labor law.) The employer filed objections to the election based on the state law.

The decision, signed August 27 but made public today, was split 3-2, with Chairman Wilma Liebman and Members Mark Pearce and Craig Becker in favor of allowing the results to stand, and Members Peter Schaumber and Brian Hayes saying that the election should have been set aside. In a concurring opinion, Chairman Liebman stated that the case had languished at the Board “for an unconscionably long time.” To read the decision in Independence Residences, Inc., 29-RC-10030, click here.

The Board, which reached full five-member strength this summer for the first time since late 2007, has been tackling a backlog that stood at more than 350 cases in mid-summer. The cases included novel and difficult issues that awaited a larger Board, as well as about 100 previously-decided cases that were returned following the June 17 Supreme Court decision in New Process Steel v. NLRB. (See background material here).

The National Labor Relations Board is an independent federal agency vested with the power to safeguard employees’ rights to organize and to determine whether to have unions as their bargaining representative. The agency also acts to prevent and remedy unfair labor practices committed by private sector employers and unions.

One of the HR That Works Members posed an interesting question. Her employee, who injured himself at home, wants to discuss a possible disability accommodation so he can return to work as a truck driver. She has the right to know what exactly the disability is, what the limitations are and any prognosis so that possible accommodations can be considered. She can, but does not have to, take his word for it unless it is obvious–which in this case it is not. She can and had an “informal” dialogue with him but she does not have to leave questions unanswered, nor take an employee’s word for their condition, again unless it is “obvious.” He has no health insurance from the employer and says he can’t afford to see a doctor. At this point the HR executive has met her obligation. To check my head on this scenario I contacted one of our favorite resources, The Job Accommodation Network. Here’s the very helpful response I received from Linda Batista, counsel for JAN, who also did an excellent ADA Webinar for us with Beth Loy on the Amendments to the ADA you can watch as an HR That Works Member any time . The green highlights below are mine alone. One caveat–there are many times when it is worth the money to have an employee see your doctor (taking a pre-hire physical or post accident drug test are two examples).

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Under the ADA, there is no obligation for an employer to pay for medical documentation as long as the request for documentation is “job-related and consistent with business necessity.” This standard is met when an employee requests an accommodation or needs a fitness for duty exam after being off work for medical reasons (as long as the disability and need for accommodation are not obvious). The exception to this rule is if an employer requires an employee to go to a health care professional of the employer’s choice, the employer must pay all costs associated with the visit(s).

May an employer ask an individual for documentation when the individual requests reasonable accommodation?

Yes. When the disability and/or the need for accommodation is not obvious, the employer may ask the individual for reasonable documentation about his/her disability and functional limitations. (27) The employer is entitled to know that the individual has a covered disability for which s/he needs a reasonable accommodation.

Reasonable documentation means that the employer may require only the documentation that is needed to establish that a person has an ADA disability, and that the disability necessitates a reasonable accommodation. Thus, an employer, in response to a request for reasonable accommodation, cannot ask for documentation that is unrelated to determining the existence of a disability and the necessity for an accommodation. This means that in most situations an employer cannot request a person’s complete medical records because they are likely to contain information unrelated to the disability at issue and the need for accommodation. If an individual has more than one disability, an employer can request information pertaining only to the disability that requires a reasonable accommodation.

An employer may require that the documentation about the disability and the functional limitations come from an appropriate health care or rehabilitation professional. The appropriate professional in any particular situation will depend on the disability and the type of functional limitation it imposes. Appropriate professionals include, but are not limited to, doctors (including psychiatrists), psychologists, nurses, physical therapists, occupational therapists, speech therapists, vocational rehabilitation specialists, and licensed mental health professionals.

In requesting documentation, employers should specify what types of information they are seeking regarding the disability, its functional limitations, and the need for reasonable accommodation. The individual can be asked to sign a limited release allowing the employer to submit a list of specific questions to the health care or vocational professional. (28)

As an alternative to requesting documentation, an employer may simply discuss with the person the nature of his/her disability and functional limitations. It would be useful for the employer to make clear to the individual why it is requesting information, i.e., to verify the existence of an ADA disability and the need for a reasonable accommodation.

Example A: An employee says to an employer, “I’m having trouble reaching tools because of my shoulder injury.” The employer may ask the employee for documentation describing the impairment; the nature, severity, and duration of the impairment; the activity or activities that the impairment limits; and the extent to which the impairment limits the employee’s ability to perform the activity or activities (i.e., the employer is seeking information as to whether the employee has an ADA disability).

Example B: A marketing employee has a severe learning disability. He attends numerous meetings to plan marketing strategies. In order to remember what is discussed at these meetings he must take detailed notes but, due to his disability, he has great difficulty writing. The employee tells his supervisor about his disability and requests a laptop computer to use in the meetings. Since neither the disability nor the need for accommodation are obvious, the supervisor may ask the employee for reasonable documentation about his impairment; the nature, severity, and duration of the impairment; the activity or activities that the impairment limits; and the extent to which the impairment limits the employee’s ability to perform the activity or activities. The employer also may ask why the disability necessitates use of a laptop computer (or any other type of reasonable accommodation, such as a tape recorder) to help the employee retain the information from the meetings.(29)

Example C: An employee’s spouse phones the employee’s supervisor on Monday morning to inform her that the employee had a medical emergency due to multiple sclerosis, needed to be hospitalized, and thus requires time off. The supervisor can ask the spouse to send in documentation from the employee’s treating physician that confirms that the hospitalization was related to the multiple sclerosis and provides information on how long an absence may be required from work.(30)

If an individual’s disability or need for reasonable accommodation is not obvious, and s/he refuses to provide the reasonable documentation requested by the employer, then s/he is not entitled to reasonable accommodation.(31) On the other hand, failure by the employer to initiate or participate in an informal dialogue with the individual after receiving a request for reasonable accommodation could result in liability for failure to provide a reasonable accommodation.

When an employee seeks leave as a reasonable accommodation, an employer’s request for documentation about disability and the need for leave may overlap with the certification requirements of the Family and Medical Leave Act (FMLA), 29 C.F.R. §§ 825.305-.306, 825.310-.311 (1997).

28. Since a doctor cannot disclose information about a patient without his/her permission, an employer must obtain a release from the individual that will permit his/her doctor to answer questions. The release should be clear as to what information will be requested. Employers must maintain the confidentiality of all medical information collected during this process, regardless of where the information comes from. See Question 42 and note 111, infra.

29. See Question 9, infra, for information on choosing between two or more effective accommodations.

30. This employee also might be covered under the Family and Medical Leave Act, and if so, the employer would need to comply with the requirements of that statute.

Editor’s Column: Cases of the Week

As part of my ongoing research efforts to help our members, I discipline myself to review Find Law’s weekly appellate court case summaries. A few weeks ago, the review summarized 29 cases – count ‘em, 29:

Rent-A-Center West, Inc. v. Jackson

Granite Rock Co. v. Int’l. Brotherhood of Teamsters

Rodriguez-Garcia v. Miranda-Marin

Malone v. Lockheed Martin Corp.

Zakrzewska v. The New School

NLRB v. Talmadge Park

Durakovic v. Bldg. Serv. 32 BJ Pension Fund

Ruiz v. Cty. of Rockland

Edwards v. A.H. Cornell & Son, Inc.

Air Line Pilots Ass’n v. US Airways Group

Kemp v. Holder

Winnett v. Caterpillar, Inc.

Pickett v. Sheridan Health Care Ctr.

Kobus v. Coll. of St. Scholastica, Inc.

Ringwald v. Prudential Ins. Co. of Am.

Jones v. Nat’l. Am. Univ.

Hawaii Stevedores, Inc. v. Ogawa

EEOC v. Peabody Western Coal Co.

Simonia v. Glendale Nissan/Infiniti Disability Plan

Medlock v. United Parcel Serv., Inc.

Narotzky v. Natrona Cty. Mem. Hosp. Bd. of Trustees

Armstrong v. Geithner

Schaefer v. McHugh

Gonzalez v. Dept. of Labor

Murthy v. Vilsack

Bifulco v. Patient Bus. & Fin. Serv., Inc.

Myrick v. Mastagni

Baker v. Am. Horticulture Supply, Inc.

Faulkinbury v. Boyd & Assoc. Inc.

Of course, none of these companies planned on being a defendant in an employment lawsuit. So, what were all the lawsuits about? Five were ERISA cases. We’ve had ERISA experts on some of our Webinars.

There were also five union cases, including one in which the company was suing the union under the Labor Management Recording Act for damages caused by a strike. In one of the union cases, the 2nd Circuit invalidated an NLRB Bush-era decision that only had two judges on the board. This is the beginning of the undoing of those Bush-era NLRB decisions. Again, we have had Webinar guests on union avoidance.

There were four race and discrimination cases, including an interesting one against a coal company by Hopi and other Native American, claiming that the coal company discriminated by favoring Navajo workers.

There were two ADA cases, one FMLA case, one privacy case, one breach of contract case, and one age discrimination case. Of the three wrongful termination cases, one was brought by a group of neurosurgeons who sued a hospital for “constructive discharge” in part because after the surgery operations shut down and the doctors left, the hospital claimed that they had stolen equipment and ordered a search of their lockers. Apparently, the search didn’t find any equipment, nor did the hospital claim that any of the surgeons specifically stole anything. The court held that it was reasonable for the hospital to do this search because it focused on instruments that could only be used in surgery.

There was a wage and hour class-action suit in California (no surprise there), claiming that security guards weren’t paid properly for their rest and meal periods. Another lawsuit was brought by a whistleblower who was transferred after testifying in an ethics probe.

That’s nearly 30 appellate cases decided during a single week in a country with millions of employers. Employment practices liability exposures might not be frequent. However, I can tell you from reading the results in these cases they are certainly severe. According to Jury Verdict Research, the average verdict hovers around $270,000, with million-dollar verdicts seemingly commonplace. Whether a company won or lost in any of these cases, it probably spent at least $200,000 in attorneys’ fees.

What should you make of all this? Very simple – be prepared to handle compliance basics! Get proper advice on managing your benefits. Focus on developing effective employee relationships and work with competent attorneys to prevent unnecessary union organization, as well as bargaining with an existing union. Make sure your HR folks stay abreast of the ADA, FMLA, age discrimination, race discrimination, and sexual harassment exposures. We have a ton of tools on HR That Works to help with those.

If you’re an HR That Works member and have a question in any one these areas, you can rely on the Hotline support of the Worklaw® members and yours truly to help get you through any tough spot.

Blowing It

A July 2010 Corporate Counsel article analyzed a huge discrimination verdict rendered against Novartis in a Manhattan federal district court jury trial. The jury determined that the company discriminated against its female sales representatives, creating an insensitive and hostile working environment. Instead of taking a conciliatory approach during trial, Novartis pressed hard and according to the article, responded by labeling the plaintiffs in front of the jury with demeaning and harsh stereotypes. The jury awarded $3.36 million to the 12 named plaintiffs, plus an additional $250 million to a class of additional 5,600 other plaintiffs. Of course, Novartis plans to appeal.

Interestingly, Novartis noted that Working Mother magazine had recognized the company for 10 years in a row as one of the top 100 firms for working mothers (Integrity, anyone?).

Lesson learned: Anytime an employer goes to trial justifying its conduct, and in fact, laying it on even thicker, it runs the risk of an enormous verdict. A conciliatory approach will usually result in a settlement or smaller jury verdict. Read the article here.

DOL Launches New Web Site Cataloguing Employer Violations

The U.S. Department of Labor has launched a new Web site that reports (in a searchable format) employer violations. The site, http://ogesdw.dol.gov/, catalogues all DOL enforcement data regarding employer violations from the Employee Benefits Security Administration (“EBSA”), the Mine, Safety & Health Administration (“MSHA”), the Office of Federal Contractor Compliance Programs (“OFCCP”), the Occupational Safety & Health Administration (“OSHA”), and the Wage & Hour Division (“WHD”). The DOL’s goal in launching the site is to “make the enforcement data, collected by these agencies in the exercise of their mission, accessible and searchable, using common search criteria, by the public. It intends, also, to engage the public in new and creative ways of using this data.” The site will soon permit searches by company name. Companies should check the site frequently to ensure the accuracy of its content.

Will You Be Prepared If The Other Shoe Drops?

There’s been a lot of press recently about the possibility of the nation falling back into a deep recession. Let’s hope not! But, just in case, are you and your management team prepared to slash costs by 10%, 20%, or more again? Do you have a Plan B for your workforce? The recession caught plenty of employers off guard. On the other hand, I know of many companies that had a Plan B in place and were able to deploy it rapidly.

Being prepared is essential for effective management of risks, whether you’re facing an economic downturn, exposure to a lawsuit, or an environmental disaster. If there’s another recession, remember that HR That Work has a number of tools to help you manage the layoff and termination process in a graceful and legal manner. I’d also recommend taking time to discuss this issue and identify the critical parameters to consider when or if the time does come.

What Employees Really Care About

I recently read that only 47% of 18-34 year olds “really care about the fate” of the enterprise for which they work – compared with 64% of those 55 and older. Although statistics like these make it easy to criticize the M generation, bear in mind that more than one-third of workers 55 and older feel the same way. So what are employees most concerned about? I won’t take you through Maslow’s Hierarchy of Needs. However, I encourage you to read the White Paper I wrote on it on HR That Works. Maslow talks in terms of survival, security, belonging, ego, and self-actualization needs. When it comes down to it, this is what most employees care about:

A fair day’s pay. 99% of the population goes to work because they have to earn money. Depending on the employee’s needs and environment, pay can either be a major or minor motivating factor.

An opportunity to grow at the company. Growth means job security, as well as more pay. Do your employees have a roadmap for this growth? How are you managing a situation in which there are few growth opportunities? Remember, people might know their present circumstances, but be uncertain their future. Don’t leave them guessing.

A positive work experience. Work is innate to our souls. It’s a great source of meaning to us. Ultimately, people want to enjoy the work experience. As Joseph Campbell so famously stated, “Work can be a life-draining affair.” I hope this isn’t the case at your company, especially if you tend to retain your best people.

A good relationship with their boss. This is perhaps the most critical part of the work experience. Do your managers empower employees or try to control them? Do they have a good bedside manner and do they encourage employees to take on new tasks and to grow in their jobs? Many a good company has lost many a good employee due to mediocre or poor managers.

Ultimately, employers must acknowledge that today’s loyalty is not to a company, but to project, career, and work relationships. Although addressing those needs might not produce the most loyal employees, it can certainly produce highly productive ones.

Remember, today’s best and brightest employees don’t have to work for you – or anyone else. What type of career and financial opportunities can you offer that they can’t get on their own or with someone else? As Daniel Pink notes, “This is a free-agent nation.” Businesses that recognize this reality will be the ones that succeed.

Electronic Signatures and Storage of Form I-9

On July 22, 2010, the Department of Homeland Security issued its Final Rule on electronic signatures and storage of Form I-9s. Under this rule, employers may:

Complete, sign, scan, and store the Form I-9 electronically (including existing Form I-9s) so long as they meet certain “performance standards” (e.g., reasonable controls to ensure the integrity, accuracy, and reliability of the system).

Use paper, electronic systems, or a combination to sign and store their Form I-9s

Southwest Airlines: You’ve Got to LUV Them!

I’m an unabashed promoter of Southwest Airlines. As someone who travels a great deal, I find the company’s customer service, pricing, and all-around flying experience to be the best in the industry. Amazingly, in 2009, Southwest continued its profitability streak for the 37th consecutive year, a remarkable feat amidst the worst recession most of us can remember. A review of their 2009 “One” Report helps define what makes Southwest so different: Its focus or passion in three areas – performance, people, and our planet.

In terms of performance, the company reduced overhead by eliminating the bottom least productive 10% of their flights. They also increased revenue with their early-bird check-in program, and trimmed costs where possible by offering voluntary early retirement, freezing overall comp and executives’ salaries, avoiding fleet growth, and conserving jet fuel.

According to Southwest, “With a Warrior Spirit, a Servant’s Heart, and Fun-Luving Attitude, our employees carried out the mission of Southwest Airlines – dedication to the highest quality customer service, delivered with a sense of warmth, friendliness, individual pride, and Company Spirit.” Even in a recession, they donated $11.6 million and more than 45,000 employee volunteer hours to charity.

Finally, Southwest, like many other corporations, takes its green initiative seriously.

How hard could it be to follow their example in your business?

Eliminate the bottom 10% of clients, customers, and activities.

Put a hold on employee count and management salaries.

Reduce overhead and trim where possible.

Continue to give; knowing that it always comes back to you.

Define your culture as one with a “Warrior Spirit, Servant’s Heart, and Fun-Luving Attitude.”

Of course, if this were as easy as it sounds, all the other airlines would do it too. Not surprisingly, just about every one of Southwest’s competitors is unprofitable, horrible to fly on, and certainly not having any fun. I’ll continue to fly Southwest, own its stock, and preach its way of business because I believe in them – as do millions of others.

Note: On page seven of Southwest’s report, you can see the numerous 2009 awards and accolades, including its rank as the seventh most admired company in the world and the world’s most admired airline company; according to Fortune Magazine. Not surprisingly, they also have the highest customer satisfaction rating and the best on-time performance of any airline. Interestingly, Alaskan Airlines comes in second in both categories and they have adopted many of the Southwest ways of doing business.

A Step-By-Step Process to Employee Problems Can Be Useful

Most people find that it’s easier to solve a problem if they take a step-by-step approach. Dealing with problems in the workplace is no different – employers benefit from having a systematic process that all managers and supervisors can follow. This “Wells Fargo” approach (going by easy stages) not only helps solve problems, but also promotes consistency and fairness, while reducing the likelihood of accidently discriminating against employees by treating them differently.

Because a process can be very useful to employers, the Job Accommodation Network (JAN) is developing a series of publications that provide sample processes that employers can use or adapt in their own workplaces.

FMLA and Call-In Procedures

One of the greatest frustrations with the “old” Family and Medical Leave Act was how it regulated company call-in procedures. With the new and improved version, the Department of Labor pretty much allows a company to require compliance with its call-in procedures so long as it doesn’t restrict the rights of the FMLA.

As the preamble to the final rule noted:

“The Department recognizes that call-in procedures are routinely enforced in the workplace and are critical to an employer’s ability to ensure appropriate staffing levels. Such procedures specify both to whom and when an employee is required to report an absence. The Department believes that employers should be able to enforce non-discriminatory call-in procedures, except where an employer’s call-in procedures are more stringent than the timing for FMLA notice. Additionally, where unusual circumstances prevent an employee from seeking FMLA-protected leave from complying with the procedures, the employee will be entitled to FMLA-protected leave, so long as the employee complies with the policy as soon as he or she can practically do so.”

So, if an employee can’t call with a foreseeable leave 30 days in advance, then they should be able to do so at least, “absent emergency situations, where an employee becomes aware of a need for FMLA leave less than 30 days in advance, the Department expects that it would be practical for the employee to provide notice of the need for leave either the same day (if the employee becomes aware of the need for leave during working hours) or the next business day (if the employee becomes aware of the need for leave after work hours).”

This month’s Form of the Month is a standard leave notice requirement that incorporates in the FMLA language. As always, if you’re an HR That Works member and have any questions about the FMLA, please don’t hesitate to contact the Hotline.

Opinion Letter: FMLA 2009-1-A does a good job of summarizing the above.

Do Your Criminal Background Checks

In workshops, I joke that “it only takes one felon to ruin a day.” This really isn’t funny, especially if such a person happens to victimize your business. Unfortunately, despite the advice that all employers should do criminal background checks on all employees, many businesses still don’t do so because they think bad things only happen to other people, or they claim that they don’t have the time or money. Remember, folks with a felonious background sell drugs, rob people, assault people, kill people, defraud people, embezzle, and engage in many other sins. I’m not saying never hire someone with a felonious background. I have some printing company clients who run their Heidelberg presses 24/7 hours a day. Most of the workers on their third shift have a criminal record. At least these companies know what type of criminal they’re dealing with. Remember this too: If you use a temporary firm, recruiter, leased employee, etc. make sure that whoever provides this person for you has done their criminal background checks.

Disabled Employees and Assignment to Vacant Positions

The statutory duty of employers to reassign disabled employees to vacant positions is mandatory. If a disabled employee can be accommodated by reassignment to a vacant position, the employer must do more than consider the disabled employee along with other applicants; the employer must offer the employee the vacant position. In a number of situations, reassignment would be unreasonable:

It’s not reasonable to require an employer to create a new job for the purposes of reassigning the employee to this job.

An employer is not required to reassign a disabled employee to a position that would constitute a promotion.

An employer is not required to reassign the disabled employee in a way that would contravene the employer’s “important fundamental policies underlying with a legitimate business interest” (a very broad, case-by-case analysis).

The job for which the disabled employee seeks reassignment must be vacant. In determining when a position is truly vacant, courts have ruled that “a position is ‘vacant’ for the purposes of ADA’s reassignment duty when that position would have been available for a similarly-situation nondisabled employee to apply for and obtain.” For example, if a company uses temp employees and under normal circumstances, nobody could apply for or obtain this job, it’s not considered vacant under the law.

The United States Department of Labor (DOL) recently announced Plan/Prevent/Protect, a sweeping regulatory agenda that will replace the “catch me if you can” method of assuring compliance with federal employment laws. Under the Plan/Prevent/Protect strategy, the DOL has directed the Occupational Safety and Health Administration (OSHA), Mine, Safety & Health Administration (MSHA), Office of Federal Contractor Compliance Programs (OFCCP), and the Wage & Hour Division (WHD) to propose regulations that require employers to develop programs demonstrating affirmative compliance with federal wage and hour, job safety and discrimination laws. As the name of the program, implies, the DOL will issue regulations that focus on:

Planning. Employers will be required to create a plan for identifying and correcting risks of legal violations and other risks to workers, including the designation of people within the company to ensure compliance. Employees will have the opportunity to participate in the plan’s creation and must provide their workers with the plans so that “they can fully understand them and help to monitor their implementation.”

Prevention. Employers will need to “thoroughly and completely implement the plan in a manner that prevents legal violations. The plan cannot be a mere paper process. The employer or regulated entity cannot draft a plan and then put it on a shelf. The plan must be fully implemented for the employer to comply with the Plan/Prevent/Protect Compliance Strategy.”

Protection. Employers must ensure that plan objectives are “met on a regular basis. Just any plan will not do. The plan must actually protect workers from violations of their workplace rights.”

Employers who fail to “address comprehensively the risks, hazards, and inequities in their workplaces will be considered out of compliance with the law” and subject to remedial action by the DOL.

Among other things, the strategy will require the WHD to promulgate regulations requiring employers to provide workers with basic employment information, including the methods of calculating their pay. An employer who wishes to exclude a worker from coverage under the Fair Labor Standards Act would need to “perform a classification analysis, disclose that analysis to the worker, and retain that analysis to give to WHD enforcement personnel who might request it.”

Avoiding Overtime Claims

Overtime claims aren’t going away. A marginal claim filed by one disgruntled employee can easily turn into a class action involving dozens of workers. To help avoid such claims, follow these guidelines:

Make sure employees that are appropriately classified as exempt. The FLSA and the State of California have done a great job defining the scope of these classifications. Unfortunately, many employers ignore them entirely or simply try to get by with a quick self-serving analysis. You’ll find the links to these definitions at http://www.dol.gov/elaws/esa/flsa/screen75.asp and http://www.dir.ca.gov/dlse/FAQ_Overtime.htm. HR That Works Members can also view the Wage and Hour Training Module.

Don’t blow a legitimate exemption by docking pay. Remember, you must pay an exempt employee for the whole week, if they work any part of it. There are exemptions in which employees purposely decide not to come to work, etc. If you treat somebody like a non-exempt employee, so will regulators, regardless of their title.

Job descriptions alone won’t cut it. Regulators will look at actual job duties and ask claimants to fill out timesheets describing their activities. Under Federal law, this is a qualitative analysis in which the “primary” activity is most important. Under California law, there is also a quantitative analysis which requires the employee to be engaged in their primary activity at least 50% of the time to be exempt.

Watch out for unauthorized overtime. Assuming someone is classified properly as non-exempt, are they abusing overtime? One printing company that began using the HR That Works Overtime Authorization Form reduced its overtime exposure by $5,000 the first month! Ask yourself: If there is overtime, is it legitimate, and if so, how do we minimize it?

It’s almost impossible to have more exempt employees than non-exempt employees. Few types of businesses (other than law firms, medical offices, engineering or CPA firms, etc.) can get away with this. Remember, if a person isn’t an executive, a real boss, in outside sales, or highly paid as a computer professional, they are not exempt –no matter how smart they are, no matter how long they’ve worked for you, and no matter how little you control them.

Form of the Month

Leave of Absence Request Policy (PDF)
Use this form to help ensure uniform leave request procedures.

(HR That Works Users can access this form in Word format by logging on to the site).